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The Suburbs Could Save President Obama From Defeat
President Obama’s disdain for suburban America has been well-documented. Yet, ironically, the current revival in housing, largely in those same suburbs, might be the one thing that could rescue his floundering campaign. Unlike the Democrat-dominated central cities and the rock-red Republican countryside, the suburbs remain the country’s primary contestable territory.
With manufacturing facing global headwinds and Wall Street stagnating, the housing recovery is helping keep the still weak economy moving forward. Housing starts are at the highest level in four and a half years. Sales and prices are on the rise, and the vast majority of the action — despite the media’s focus on multi-family developments — is taking place among single-family homes that predominate in the suburban rings of our metropolitan area. Over the past two years, 76% of the new privately owned housing units completed were single-family homes, according to Census Bureau figures. In existing home sales, last year over 4.3 million single-family homes were purchased, compared to 520,000 condos.
This trend is being driven by such factors as rental costs, which rose with the recession, a decline in foreclosures, low interest rates and, particularly in some markets such as Phoenix, investors who see long-run demand in single-family markets. Demand has sparked a nascent revival of homebuilding, now at the highest level since the Great Recession, although still half its historic rate.
The housing recovery could make a particularly important difference in the election in key swing state suburban communities on the outskirts of Cleveland, Detroit, Pittsburgh, Philadelphia and Denver, and in the northern Virginia suburbs of the capital. In these areas, homes — not stocks and other financial assets — are the primary measure of wealth, and the most critical weathervane of economic wellbeing. Single-family home sales also spur other sectors of the economy, such as financial services, construction and the home furnishing industries in ways far greater than denser developments. The good feelings about the auto recovery have helped the president in industrial states; similarly the improved housing market gives him a lift in these critical suburban areas.
Some Clinton-era Democrats, like former U.S. Deputy Treasury Secretary Robert Altman, recognize that expanding housing markets makes for stronger, broader-based economic growth. This is why historically Democrats favored single-family housing, from Roosevelt and Truman to Bill Clinton. Altman predicts a full-scale housing boom by 2015; if he’s right, and Democrats are in power, and on board, this could propel their ascendency for another generation.
Of course from an ideological point of view, this emerging boom may not be much welcomed in the current administration. Most Obama backers in places like the Department of Housing and Urban Development, including Secretary Shaun Donovan, have long predicted that suburbs are entering their death throes, predicting a massive movement of people from the suburbs to inner city areas. Where possible, HUD has tried to encourage “smart growth” by providing grants for projects aimed at greater densification.
Yet these widely lauded efforts are swimming against the fundamentals of market demand, and at a cost to both the budget and longer-run economic growth. Despite misleading press reports, inspired in part by Census Bureau epistles focusing on increasing downtown populations, the vast majority of population growth has continued to take place far away from the urban core.
Indeed over the last decade, while some downtowns have grown, they accounted for 1.3% of the overall population increase in the country’s largest metropolitan areas. At the same time, areas two to five miles from the central cores lost population while areas beyond 10 miles out grew by more than 20% and accounted for more than 60% of growth. Overall Americans have continued to vote with their feet for suburbs — overwhelmingly.
Some urbanists, including some close to the current administration, claim that the realities of the last decade are now passé, a permanent victim of the housing bust. Yet in reality these claims appear largely off the mark. Recent Census estimates for last year, for example, were widely reported to show greater growth in core cities than suburbs, but turned out to be based on unsupported assumptions that all county growth occurred equally across geographies, making it impossible to judge the widespread claims of a massive movement “back to the cities.”
At the same time, a new analysis by Trulia.com chief economist Jed Kolko, based on postal data, shows that growth rates were about the same. But in an attempt to discover actual preferences, Kolko then analyzed the growth rates by densities. Much of the “urban” growth, particularly in Sunbelt cities like Phoenix and throughout the Midwest, actually takes place in largely suburbanized, relatively low-density areas.
Kolko found that the populations of “more suburban” neighborhoods grew 0.73% in the past year, more than twice as fast as the “more urban” neighborhoods, where growth was 0.35%. In fact, urban neighborhoods grew faster than suburban neighborhoods in only five of the 50 largest metro areas — Memphis, New York, Chicago, San Jose and Pittsburgh — and often by a really small margin. In the other 45 large metros, the suburbs grew faster than the more urban neighborhoods. Overall, Kolko concludes, household growth in most metropolitan areas was greatest the further from the core, and less closer to it.
The movement of people into lower-density areas jibes with one of the biggest reasons for the current nascent housing recovery: the preference by roughly four in five Americans for a single-family house — usually but not always found in the suburbs — over an urban apartment. In a sense, then, the hostility to suburbs among the administration and the Democratic Party is both profoundly anti-democratic and anti-growth.
Recovering housing prices provide a lifeline for our beleaguered middle class. A recovery provides greater employment to the very people — construction workers, manufacturers of home furnishings and real estate agents — who were among the biggest victims of the Great Recession. Some progressives might celebrate the diminishment of such jobs and prefer they now service the post-industrial uberclass, but it’s hard to see how a large part of our middle and working classes can maintain, much less ascend, without a strong housing sector.
Signs of recovery, of course, extend beyond housing. Even malls, also long suffering, and under digital assault, are beginning to recover. Meanwhile rental apartments, once the darling of the speculative class, have begun to lose their momentum, in part due to improving home affordability. Massive overbuilding in some markets could lead to a new gusher of real estate tears. Something is happening here.
Contrary to conventional wisdom, if the economy strengthens, the suburban and single-family market will do likewise in the years to come. First-time homebuyers will provide a strong source of demand for an increasingly scarce product. Rather than rejecting the ideal of owning a home, 84% of today’s renters still intend eventually to purchase their residence, according to a recent study by TD Bank.
Homeownership and the white picket fence might be out of fashion among the cognoscenti, but not among new Asian immigrants, who are heading to the suburbs, or the rising number of 30-somethings, three quarters of whom, according to a recent Better Homes and Gardens survey, see homeownership as a “key indicator of success.”
Although still in its early phases, President Obama would be wise to use the suburban housing recovery to help portray himself as the savior of the middle class. The most notable gains made by Romney in the polls recently have been in the suburbs. It may be too late for the president to make better strategic use of the incipient recovery for this election, but if he is victorious and can swallow his anti-suburban mindset and embrace what most Americans regard as their preferred emblem of success, he could help consolidate a strong Democratic hold on the suburbs that could play a deciding role in our politics for the decades ahead.